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E-Invoice vs Paper Invoice: What are the differences you should know about?

Updated on: Feb 19th, 2024

10 min read

In the age of digital revolution happening across the globe, businesses have started to shift from traditional paper invoices to electronic invoices (e-Invoices) for their business operations. This transition in the use of invoice medium is largely driven by the need for business efficiency and cost savings.

e-Invoicing in Malaysia was announced in the 2023 budget as a part of the Government's initiative to promote a paperless environment in businesses and digitize the activities of the tax department.

The IRBM (Inland Revenue Board of Malaysia) announced that e-Invoices would be gradually implemented from 1 August 2024. An e-Invoice in Malaysia will replace paper or electronic documents such as invoices, credit notes, and debit notes.

The e-Invoice applies to transactions such as those between Business to Business (B2B), Business to Customer (B2C), and Business to Government (B2G). In B2C transactions, sellers can continue to issue a normal invoice or receipt.

We will explore the key features, advantages, disadvantages, and how ClearTax can help in e-invoice generation in the below paragraphs.

What are the key features and functionalities of electronic invoices and paper invoices?

Electronic Invoices

E-invoices are digital invoices that follow the defined digital format and provide several benefits:

Standard format - e-Invoices follow a standard format that can be used across various businesses and thus help avoid differences.
Automated data entry - e-Invoices are created digitally in the billing system of the seller. They generally do not require manual processing.
Efficiency and cost-saving - Due to its technology-driven features, e-Invoices help avoid human-related errors and improve cost efficiency. They also reduce disputes and payment delays due to the availability of audit trails.
Easy integration with accounting systems - Businesses can integrate with accounting software or ERP solutions to automatically generate electronic invoices.

Paper Invoices

Paper invoices refer to the traditional method of generating and distributing printed physical invoices. Here are some key features and functionalities of paper invoices:

Physical creation: Paper invoices are tangible documents that can be physically handled, stored, and filed.
Manual data entry: Paper invoices are generated either by inserting the data manually or via Optical Character Recognition (OCR). These methods require additional checks for data accuracy.
Physical delivery: Paper invoices require physical delivery via courier or mail.
Prone to errors: Due to their human-driven nature, they are prone to error.

While electronic and paper invoices serve the same purpose, the difference lies in their ease of use, features, and functionalities. However, with ever-evolving business needs and changing global trade patterns, digital invoices provide an easy and fast billing solution to businesses across the world.

Electronic invoices vs. paper invoices: Advantages and disadvantages

E-invoices and paper invoices have their own set of advantages and disadvantages. Based on the requirements of a particular industry, either of them can be used by the business.

The advantages and disadvantages of electronic invoices are detailed below:

Advantages of electronic invoices	Disadvantages of electronic invoices
Real-time invoices tracking.	Not applicable to all types of invoices.
Easy tax compliance with automatic data flow in the system.	Incorrect data captured by the taxpayer may lead to revenue loss to the government.
Reduction in fraud due to the creation of an automatic audit trail.	The high possibility of system hacks may lead to data loss and incorrect processing of data.
Cheaper and efficient method of invoicing	More job loss due to process automation.

Just like electronic invoices, there are advantages and disadvantages of paper invoices as detailed below:

Advantages of paper invoices	Disadvantages of paper invoices
Helpful during audits and tax investigations.	A high level of human involvement increases the risk of error in the invoice.
Useful record-keeping tool for verification.	Time consuming process.
Some businesses and customers prefer physical documents as they provide a sense of business security.	Dependence on humans results in increased human resource costs for the business.

How ClearTax can help in generating electronic invoices?

If you are undertaking commercial activities in Malaysia and are required to generate e-invoices, it is necessary to have good software that supports the electronic invoicing requirements of your business.

ClearTax can help you connect your billing software or ERP with the IRBM cloud seamlessly and effectively. This ensures that your business is 100% compliant with the e-invoice requirements of IRBM.

There are several key features of the e-invoicing module solution offered by ClearTax –

Data validations and successful processing: ClearTax provides a 99.99% success rate in e-invoice generation with over 150 data validations.
Easy software integration: ClearTax can be easily integrated with over 50 ERPs available in the market.
Personal account manager support: The account or relationship manager helps the business in getting the queries resolved at the earliest with round-the-clock customer support.
Add-on features: ClearTax provides a range of value-added services such as data analysis based on e-invoices, easy QR code generation on invoices, and custom print templates for e-invoices, etc.

Electronic invoices are fast replacing conventional paper invoices across the globe. With their seamless data generation, integration with ERP, and ability to prevent fraudulent transactions, e-invoices are expected to be the new normal for the billing industry.

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